London Metal Exchange to Launch: In a strategic move that underscores China’s growing influence in global metals markets, the London Metal Exchange (LME) is planning to introduce new metals contracts utilizing prices from the Shanghai Futures Exchange (ShFE), according to three industry sources familiar with the matter. The collaboration signifies a significant shift in direction for Chinese exchanges, as they aim to innovate, expand their global influence, and assert greater control over commodity prices.
LME’s Chief Executive, Matthew Chamberlain, hinted at this collaboration during the annual LME Week dinner in October. The concept of allowing an overseas exchange to use domestic prices would have faced resistance two years ago. However, recent developments indicate a change in perspective, driven by Chinese exchanges’ strategic objectives and government pressures.
Known as cross-listing, this initiative involves launching new LME metal contracts settling against ShFE prices. The LME would pay ShFE a license fee, and the contracts would be cleared at the LME’s clearing house. While the sources did not provide a timeline for the launch, this move reflects a deeper collaboration between LME and ShFE in product innovation to better serve international participants in risk management and price discovery.
Also Read: Cobre Panama Legal Blow: First Quantum Faces Mine Closure Amid Contract Controversy
The specific metals involved in this initiative are undisclosed, but copper and aluminum are potential candidates, given their high trading volumes on both ShFE and LME. This collaboration aims to simplify the trading process for contracts listed on the Shanghai Futures Exchange, making it more accessible for international participants.
However, there are potential downsides, including Chinese regulators’ significant oversight over prices, potential interventions, and the uncertainty of license renewals. LME members may welcome the initiative, anticipating growth in volumes and income, but the success of new contracts based on ShFE prices will depend on achieving sufficient volume and liquidity.
As the LME seeks to deepen its collaboration with ShFE, this move reflects the evolving landscape of global metals trading, with China playing an increasingly pivotal role in shaping market dynamics.
Our Reader’s Queries
Which metal is traded on London Stock Exchange?
As a leading commodities exchange, the London Metal Exchange (LME) offers a wide range of futures and options contracts for trading. Precious metals like gold and silver, as well as industrial metals such as zinc and copper, are among the many metals listed on the LME.
Is the LME nickel being canceled?
On March 8, 2022, the LME suspended nickel trading at 08:15 am and later cancelled all nickel trades entered that day before the suspension took effect at 12:05 pm. The total value of the cancelled trades amounted to a staggering US$12 billion.
What is an LME future?
LME futures offer a unique chance for metal and investment professionals to manage price risk. By entering into a futures contract, parties commit to buying or selling a set amount of a particular metal on a predetermined date at a fixed price agreed upon today. This provides a reliable way to transfer and take on price risk in the market.
Who owns the London Metal Exchange?
LME Holdings Limited joined the HKEX Group on December 6, 2012, and now owns the London Metal Exchange entirely.